Strong Economic Conditions and a Tight Home Sales Market in Austin HMA

Strong Economic Conditions and a Tight Home Sales Market in Austin HMA

Sales housing market conditions in the Austin HMA, located in HUD Region 6, are currently tight, with an estimated owner vacancy rate of 0.9 percent

HUD’s Comprehensive Housing Market Analyses provide information on changes in local economies, housing markets, and populations and provide three-year forecasts for demand in the area. This article is part of a series that sheds light on the content of these analyses.

The Austin-Round Rocks, TX housing market area (Austin HMA) — coterminous with the Austin-Round Rocks, TX Metropolitan Statistical Area (MSA) — is located in south-central Texas and includes Bastrop, Caldwell, Hays, Travis, and Williamson counties. The city of Austin is the state capital and is known for its robust music scene. The current population of the Austin HMA is estimated at 2.31 million people. A recent comprehensive housing market analysis highlighted economic and housing market activity in the Austin HMA. Analysis for this report was undertaken in January 2021 and reflects the local conditions at the time.

Strong economic conditions buoyed by a robust technology industry

The Austin HMA economy weathered the coronavirus pandemic better than elsewhere in the nation, in part due to less stringent shutdown measures. In 2020, nonfarm payrolls declined by 2.1 percent compared to the 5.8 percent decline nationwide. During this period, the unemployment rate in the Austin HMA was 6.1 percent.

Although the leisure and hospitality sector experienced a significant 19.9 percent decline in employment (a loss of 27,000 jobs), several sectors increased employment in 2020, including construction, manufacturing, transportation, financial activities, and professional and business services. Of those growing sectors, the financial activities sector saw the largest increase in employment at 11.3 percent, an increase of 7,500 jobs.

The professional and business services sector is the largest economic sector in the Austin HMA, accounting for 19 percent of area payrolls. High employment in this sector can be attributed to Dell Technologies Inc. and the large presence of the technology industry in the area. The robust technology industry has positively impacted employment in the manufacturing sector, where Samsung and Apple both have manufacturing facilities employing 8,935 and 7000 people, respectively.

The government sector is the second largest economic sector in the Austin HMA, accounting for 17 percent of area payrolls. As the state capital, there are many federal, state, and local government offices in the area, as well as the University of Texas at Austin, which is the second largest employer in the area with approximately 16,800 employees.

Over the next three years, employment growth is estimated at 3.7 percent annually, which the report partly attributes to job recovery in the leisure and hospitality sector. Other contributing factors include the opening of manufacturing plants and new corporate headquarters for companies in the technology industry.

Tight home sales market amid high demand for housing

Since 2010, the Austin HMA has been one of the fastest-growing metropolitan areas in the nation, which has increased the demand for housing and propelled home sales prices and rents. In 2020, the home sales market was tight with an estimated vacancy rate of 0.9 percent and a low supply of less than one month of housing. The housing market is among the tightest in the nation. In 2020, there were 67,900 homes sold, which was an 11 percent increase from the year prior. In 2020, the average home sales price was $359,400, which was an increase of 3 percent from the previous year. In response to strong demand, 22,400 sales units were permitted in 2020, marking the first time permitting eclipsed 20,000 units.

In 2020, the rental market was balanced with an estimated vacancy rate of 7.3 percent, while the apartment vacancy rate was soft with an estimated vacancy rate of 8.0 percent. The report partly attributes the softer conditions to a large number of apartment completions in 2019 and the reduced demand for apartments in 2020 to the pandemic. In 2020, there were 21,200 rental units permitted for construction in the HMA, which was a 33 percent increase from the year prior. Over the next three years, demand is estimated for 56,700 new owner units and 33,250 new rental units.